How a jar of jelly beans can predict Bitcoin prices. Let’s run an experiment.

Tap into the wisdom of the crowds.

When is this bear market going to bottom out? Among the massive uncertainty of the last months, many investors, entrepreneurs and opinion makers have been asked this question lately. But why would anyone hold any secret knowledge about how the market is going to behave? Anyone’s opinion, no matter how accomplished the person, is as uninformed as the next opinion when it comes to predicting the future.

Does this mean that there’s no way of estimating where markets will bottom? Not really. But to arrive to a better way of predicting market behavior, we need to take a small detour first, and shortly introduce the ‘wisdom of the crowds’ approach.

In 1906, in a doleful rainy coastal town in South-West England, a group of townsmen participated in a contest to guess the weight of a dressed ox. Upon studying the results, Francis Galton, one of the last true polymaths of the modern age, stumbled upon a simple but revolutionary observation. An observation that changed the history of mathematics and constituted the initial grounds for the field of statistics. Yes. Statistics.

Galton astonishingly found that although not a single individual in the crowd of townsmen had guessed the weight of the ox correctly, the median of all answers taken together approached the actual weight with surprising accuracy, within 1% of the measured result.

In 1987, Jack Treynor, Professor of Finance at the University of Southern California, conducted a similar experiment in an effort to prove market efficiency. He asked participants to estimate the number of jelly beans in a jar. While the actual number was 850, the median answer was 871. Only one in 56 individual participants made a guess that was closer to the true value than the group median was.

In generations since Galton, the field of statistics has been put on more and more solid footing, and the concept of the ‘wisdom of the crowds’ has found many more implementations beyond estimating the body mass of bovines or the number of jelly beans in a jar. It led financial journalist James Surowiecki to dedicate a book to this phenomenon in 2004, which got favorably compared to Malcolm Gladwell’s bestsellers.

So here’s what’s always astounded me. Why does the crypto space seem to care so much about price estimates from so-called experts? Almost all these people have clear conflicts of interests, and by definition they are only able to provide one guess. On top of this, we tend to ask the same opinion makers who’s estimates have historically been off by orders of magnitude to have another crack at this impossible prediction game.

By now we all understand that today’s media culture benefits those who dare to make bold new-worthy statements in a pursuit for eyes and clicks. In the everlasting effort to save our precious time and resources, we have developed an inbuilt aversion towards thoughtful analysis. As markets anticipate a turnaround, we can expect more and more of these expert opinions to feature in the media.

And yet. The wisdom of the crowds states that taking all the answers of a group together is far superior to the answer of any individual in that group. If the conditions are right, your guess is as good as that of Roger Ver, Charlie Lee or Tim Draper. The right circumstances for a group to be more intelligent than the individuals it consists of are if there is diversity, independence and decentralization. In other words, it takes a mess to get to useful answers.

With half of the crypto market wiped out in just the last month, and even traditional markets taking heavy losses, we’re proposing a simple mass experiment. Let’s start a simple survey with only two questions: When and at which price will Bitcoin prices bottom out.

Once we have gathered +1000 guesses, we’ll share back the results on Twitter and our site https://portfolio.io. To make it work, we need a diverse group of participants. Veterans and newcomers, bears and bulls, every Tom, Dick and Harry, whoever you are. Let’s see if Galton was right, and crowds are indeed wiser than individuals. Who knows, it might generate some unexpectedly accurate results.

Participate in this mass experiment below to help predict the recovery: (no log-ins or sign-ups required)

Bitcoin slumps after bomb threats that were emailed across the US demanded it for ransom

The New York Police Department said the bomb threats that have been reported around the country Thursday afternoon were emailed by someone demanding bitcoin.

Bitcoin plunged more than 6% to near $US3,300 a coin after the New York Police Department said that bomb threats that have been emailed around the country Thursday afternoon were made by someone demanding bitcoin. Thursday’s selling had the cryptocurrency contending with its lowest level in over a year.

“Please be advised – there is an email being circulated containing a bomb threat asking for bitcoin payment,” the NYPD said in a tweet. “While this email has been sent to numerous locations, searches have been conducted and NO DEVICES have been found.”

The NYPD added that these threats are meant to cause disruption or obtain money, and that the threats do not appear to be credible. The threats were made across the country, according to the FBI. At least 13 threats were made in New York City, NBC 4 said.

Bitcoin, the largest digital currency by market value, has lost half of its value since November 14, making a difficult year for crypto investors even worse.

Investors in the digital currency saw its price explode in 2017 as cryptomania swept over the world. Bitcoin began 2017 worth less than $US1,000 a coin before soaring more than 2,000% to a high of $US19,511.

This year has been a different story, however, with the cryptocurrency’s value having plunged by 75%.

LONDON (Reuters) - The use of bitcoin for commercial payments has dropped dramatically this year, even as the original digital coin starts to fulfill one of the basic features of any payment currency: stability.